Economic Incentives in the Socially Optimal Management of Infectious Disease: When R₀ is Not Enough

Does society benefit from encouraging or discouraging private infectious disease-risk mitigation? Private individuals routinely mitigate infectious disease risks through the adoption of a range of precautions, from vaccination to changes in their contact with others. Such precautions have epidemiological consequences. Private disease-risk mitigation generally reduces both peak prevalence of symptomatic infection and the number of people who fall ill. At the same time, however, it can prolong an epidemic. A reduction in prevalence is socially beneficial. Prolongation of an epidemic is not. We find that for a large class of infectious diseases, private risk mitigation is socially suboptimal—either too low or too high. The social optimum requires either more or less private mitigation. Since private mitigation effort depends on the cost of mitigation and the cost of illness, interventions that change either of these costs may be used to alter mitigation decisions. We model the potential for instruments that affect the cost of illness to yield net social benefits. We find that where a disease is not very infectious or the duration of illness is short, it may be socially optimal to promote private mitigation effort by increasing the cost of illness. By contrast, where a disease is highly infectious or long lasting, it may be optimal to discourage private mitigation by reducing the cost of disease. Society would prefer a shorter, more intense, epidemic to a longer, less intense epidemic. There is, however, a region in parameter space where the relationship is more complicated. For moderately infectious diseases with medium infectious periods, the social optimum depends on interactions between prevalence and duration. Basic reproduction numbers are not sufficient to predict the social optimum.